Brendan Ahern, Managing Director, KraneShares, looks at Alibaba’s S-1 filing from last night:

Alibaba filed for its highly anticipated IPO late yesterday. A great deal of attention was focused on its filing to get a better understanding of the financials of the company and the size of the IPO. A number of questions still need to be answered, one point is clear however, this will be the largest IPO since Facebook and will bring to market a company whose valuation will likely be larger than 95% of S&P 500 companies.

Filing Takeaways

  • Alibaba did not specify the number or price of shares it will offer or what valuation it will seek. Those details will likely be provided closer to the actual sale.
  • The filing has a $1 billion placeholder amount, which is used to calculate registration fees and will change.
  • Alibaba’s filing begins a process that will take several months before it becomes a publicly traded company.
  • The company will likely make revisions to its filing document and has announced it will meet with investors during a formal roadshow, after which a price for the shares will be set.
  • Alibaba’s market value is estimated by analysts to be $168 billion, which as we mentioned is bigger than 95% of the Standard & Poor’s 500 Index.
  • Alibaba will be the the most valuable Internet company after Google which has a market cap of about $347 billion. ( is valued at $137 billion and Facebook is valued at $150 billion.)
  • Expectations are that the company is looking to sell about a 12% stake, which would make the offering around $20 billion based on the estimated value of $168 billion.

NYSE or Nasdaq Listing?

  • The company still has to decide whether to list its shares on the New York Stock Exchange or Nasdaq Stock Market.
  • Since Alibaba is not a U.S. company, it will not be eligible for inclusion in the S&P 500.
  • The NASDAQ-100, which is tracked by the PowerShares QQQ allows for the inclusion of foreign companies. As ETF Trends recently reported, Baidu, China’s largest Internet search provider, is a member of QQQ, but not the S&P 500, although Baidu easily meets the market cap criteria to be an S&P 500 constituent.
  • It would still take several months before Alibaba could enter the NASDAQ-100 and QQQ. In a hypothetical example, if Alibaba goes public on the Nasdaq on June 15, it would not be eligible to enter the NASDAQ-100 until Oct. 1.
  • KWEB the only pure play China Internet/E-commerce ETF will add Alibaba within days after its listing.

Alibaba Quick Facts

  • In 2013 Alibaba processed 11.3 billion orders with a value of $248 billion-Two thirds more than Amazon and Ebay combined
  • Alibaba has 231 million active annual buyers.•  Alibaba’s sales accounted for 84% of China’s online shopping.
  • A big annual event for Alibaba occurs on Nov. 11, when the company conducts a huge online shopping sale that coincides with “Single’s Day” in China-where young Chinese lament or celebrate being single.
  • 2013’s Single’s Day generated approximately $5.7 billion in sales, even though only about 45% of Chinese shoppers have access to the internet.
  • 76 percent of all mobile retail in China (not including virtual goods) came from Alibaba sites.

Alibaba Ownership Structure

  • Founder Jack Ma 8.9%
  • SoftBank 34.4%- No plans to sell shares
  • Yahoo 22.6%-Has announced plans to sell shares in the IPO-potentially 40% of its shares

China Internet/E-Commerce Demographics

  • China’s total population is estimated to be over 1.35 billion people
  • In 2013 there were 302 million internet shoppers
  • 613 million people have access to the internet
  • 500 million people in 2013 accessed the internet through their mobile phones
  • Online shopping accounted for 7.9% of total China consumption

KWEB: KraneShares China Internet/E-Commerce ETF

  • Will add Alibaba within days of the company’s IPO
  • Currently owns 28 of the largest China internet/e-commerce focused companies
  • Listed on Nasdaq
  • Provides access to the tremendous internet/mobile trends taking place in China

Sources: iResearch, CNNIC, Bloomberg, Reuters

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